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Understanding loan rates

We explain what APR means – and the difference between representative and personal APR.

When you’re searching for a loan, it’s important to understand how loan rates work before you apply.

Take a few minutes to find out about APR, to make sure you’re armed with the information you need to move forward with your plans.

What’s an APR?

APR – or Annual Percentage Rate – refers to the total cost of your borrowing for a year. Importantly, it includes the standard fees and interest you’ll have to pay.

Let’s say you borrow £10,000 over 3 years to buy a car. An APR of 4.9% would include your annual interest rate as well as standard fees payable for the loan. You would then pay 36 monthly repayments of about £299, totalling £10,756.10. This includes the £10,000 you borrowed and £756.10 in interest and fees.

Your repayments are the same every month because of how the interest is calculated. At the start of the loan term, your repayments will include more interest but less of the loan balance. Towards the end of the loan term, your repayments will include less interest but more of the loan balance.

What’s a representative APR?

APR can help you compare lending products, such as loans or credit cards, on a like-for-like basis.

If you search for a loan, say on a price-comparison site, the different loan options are often ranked by representative APR.

The clue is in the word ‘representative’. When a loan is advertised with a representative APR, it means that at least 51% of customers receive a rate that is the same as, or lower than, the representative APR – although not everyone within the 51% will necessarily get the same rate.

It can be easy to assume that the lender with the lowest representative APR you find advertised will give you the best rate. However, when you apply, it’s likely you’ll receive a personal APR based on your circumstances. This could be the same, higher, or lower than the representative APR.

Watch our video for a simple breakdown of APR. It could help you to understand loan rates in more detail before you borrow any money.

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So, what’s a personal APR?

When you apply for a loan, it’s likely that the rate you receive will be based on your personal circumstances. It will take into account your credit history and finances, as well as the loan amount and length of your borrowing. This is your personal APR.

It’s important to realise this before you apply – particularly if you’re shopping around based on the representative APRs you see advertised.

The representative APR is a useful comparison tool, but not necessarily the rate you’ll receive. Indeed, it’s likely that customers will get a personal APR even if they are in the 51% who receive a rate that is the same as, or lower than, the representative APR.

You might not know your personal rate until after you’ve applied for a loan, and simply applying could affect your credit rating.

This is because lenders will usually check your financial background with a credit reference agency before deciding whether to make you a loan offer, and the checks will be recorded on your file. Once you take out a loan, the lender has to update your credit file.

How do I find out what my rate is?

Knowing your personal loan rate before you apply could save you time, and help you move forward with your plans.

To make things simple, if you bank with us, you can check if we’re able to tell you what your personal rate is in advance online or with Barclays Mobile Banking. Plus, we may already have a provisional loan limit ready for you1. Find out more here.

What if another lender offers me a better deal?

If you take out a Barclayloan and another lender offers you a like-for-like unsecured loan with a lower APR within 30 days, you can claim under our guarantee.

We’ll reduce the interest rate to match the competing lender’s APR and recalculate your monthly repayments to reflect the reduced interest rate. See our full guarantee terms and conditions here.

All loans are subject to application and status, early settlement fees may apply.

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Important information

Not all customers can apply for a Barclayloan or view their personalised price quote or provisional loan limit online or in Barclays Mobile Banking. Certain restrictions apply. Contact us to discuss your options.

Barclays Bank PLC. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 122702). Barclays Bank PLC adheres to The Standards of Lending Practice which is monitored and enforced by The Lending Standards Board. Further details can be found at www.lendingstandardsboard.org.uk. Barclays Insurance Services Company Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register number: 312078).